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Plugging The Black Hole: Bavaird v Sir Robert McAlpine Ltd & Others

Plugging The Black Hole: Bavaird v Sir Robert McAlpine Ltd & Others

The Inner House of the Court of Session in Edinburgh has attempted to plug a legal black hole which can arise where liabilities are transferred from one party to another, in this case to a statutory successor.

This decision concerns a claim following the death of Mr Bavaird due to an asbestos related condition mesothelioma. The challenge was that one of the late Mr Bavaird’s employers, East Kilbride Development Corporation, had been dissolved in 1996 and its assets and liabilities transferred to South Lanarkshire Council, one of the defenders in the case. The Council argued that at the time of the transfer Mr Bavaird had not developed the condition therefore the transfer from the Development Corporation to the Council could not include a liability which did not exist at the time of the transfer.  Mr Bavaird could not have sued at the time of the transfer and therefore the transfer could not include a non-existent liability.

In the first round of legal debate this argument was successful before Lord Brailsford in the Outer House of the Court of Session. Mr Bavaird’s executors and relatives appealed to the Inner House, where Lady Paton, Lord Drummond-Young and Lord Marnoch rejected the Council’s argument and allowed the appeal.

They looked closely at the wording of the transfer order, and concluded that ‘liability’, properly construed in the legal and factual context, would include any future liabilities. Specifically it would include the possibility or risk that Development Corporation employees, might, post-transfer to the Council, develop mesothelioma due to the pre-transfer exposure to asbestos.

Insurance impact

The plugging of this black hole has an important insurance aspect to it.

Should Mr Bavaird ultimately succeed in his claim insofar as his period of employment with the Development Corporation is concerned, it is the Council who would be liable. Since the Council were not his original employer, there is apparently no insurance cover in place to meet the risk.

Much turned on the detail of the transfer order but the court has adopted a purposive approach. Looking at the wider implications of the decision, public bodies which are the successors of now defunct predecessors as a result of statutory consolidation exercises may now be exposed to additional liabilities for which there is no insurance cover.

For guidance on managing the risks associated with a transfer of liabilities please get in touch and we will be pleased to assist.

Ewan McIntyre